It is becoming increasingly possible to set up continuing billing arrangements charged to a credit card, debit card, checking account or other financial account. Typically, a customer fills in a form that gives a merchant authorization for not just a single charge, but for a series of (typically periodic) charges to a specified credit card or account. Examples of merchants that accept such arrangements include long distance telephone carriers, newspaper home delivery services, automobile rental agencies, discount dining clubs, book clubs and music clubs. Each month, or upon each sale, the merchant charges the appropriate amount to the specified credit card or account.
Customers occasionally lose their credit or debit cards or have them stolen. When this happens, the customer notifies the card issuer, which cancels the card to prevent misuse. The card issuer then issues a new card, having a new account number, to the customer. Likewise, checking, savings or other financial accounts may be closed or transferred. All further charges to the old card account or to the old financial account, including charges from merchants having continuing billing arrangements, are no longer honored. This causes inconvenience to customer, who must supply such merchants with new card or financial account numbers and authorizations. Customers may also have to pay additional fees, such as "late charges", to merchants, due to the fact that certain billing transactions were not honored. Costs are also imposed upon merchants, due to delayed receipt of payments and due to having to process new authorization paperwork.
Many credit and debit cards have expiration dates. Any authorization that a customer has made to a merchant is not valid after the expiration date of the specified card, until the authorization is renewed. If a card is allowed to expire, without a new authorization having been processed, problems may arise that are similar to those which arise when a card is lost or stolen.
A need arises for a technique which would avoid the cost and inconvenience caused by loss or expiration of credit or debit cards, or the closing or transfer of financial accounts, without exposing customers or merchants to increased risk of fraudulent charges made to stolen or expired cards or closed accounts.